Supply cut to spike smartphone prices in 2019

CAPE TOWN – Counterpoint, an analysis firm headquartered in Asia has released their latest research focused on the smartphone market which it said will experience an annual decline for the first time in history.

According to the firm, it has been a tough year, as the market had been experiencing negative growth since the fourth quarter of 2017.

" After years of growth, the smartphone market has finally come to a halt. To be accurate the market had enjoyed a CAGR (compound annual growth rate) of 16 percent for the last five years between 2012 and 2017. This is close to growing 16 percent every year", said Counterpoint in a statement.

The smartphone forecast report showed that smartphone growth will drop to a negative 1.3 percent in 2018 and states that the negative trend is expected to continue in the September quarter and upcoming December quarter.

"This is a mixture of multiple factors starting from the global economy slowing down and exchange rates in emerging markets fluctuating rapidly as in the case of Latin America.

The US-China tariff wars aren’t helping the situation either. Some markets are cooling down after years of overshooting caused by extreme competition. But at the core of the weak demand could be the change in consumer behaviour", said the firm.

Commenting on the weak market demand, Research Director, Tom Kang said, “Many markets have already hit a saturation point for new smartphone demand and are dependent on replacement demand."

"However, since last year consumers have decided to trade up whenever they had the chance and are thus going for a better device, despite the price difference. This is evident in the introduction of Apple’s iPhone X last year but buying a more expensive device results in extending the length of replacement cycles, especially when your earnings are limited.”

Kang explained that the higher smartphone average selling prices (ASPs) has led to more revenue and despite the negative growth in smartphone shipments, smartphone revenues are expected to show positive growth.

“Overall smartphone revenue may grow 9% compared to last year. This is even higher than the 7% revenue growth of 2017,” said Kang in the statement.